Raytheon Corp., a massive U.S. defense contractor best known for manufacturing the Patriot missile defense system, has agreed to merge with industrial technology giant United Technologies in an all-stock deal, the two companies announced Sunday. The combined company will have annual sales of about $74 billion, making it the second-largest U.S. aerospace company behind Boeing.
Unless the deal is blocked, the newly formed Raytheon Technologies Corp. will absorb United’s Collins Aerospace and Pratt & Whitney, both leading producers of jet engines and engine parts. It will not inherit United’s Carrier air conditioner business or its Otis elevator company, both of which are being spun off under the terms of an earlier deal.
In a phone interview Sunday evening, executives from both companies said the deal was driven by a desire to create a leading aerospace technology company using state-of-the-art hardware from the defense and commercial aviation industries. The combined company will employ more than 60,000 engineers, will have about 38,000 active patents, and will have enough financial firepower to invest $8 billion each year in research and development, they said.
“This is bringing two great technology companies together to provide technology solutions to our aerospace and defense customers that nobody else could ever provide,” said United Technologies chief executive Greg Hayes, who will lead the combined company as chairman and chief executive following a two-year succession plan.
He added that the combination “is not about cost-takeout or job loss in the U.S.,” noting that the company expects to hire about 20,000 people in the next year.
Raytheon chief executive Thomas Kennedy, who will become chairman of the new company, said: “Technology is a foundation for the entire company, and then upon that we build a commercial business and a defense business.”
The company should be expected to make a strong play for the Defense Department’s emerging hypersonic missiles programs, in which its rival Lockheed Martin appears to have taken an early lead. The company will continue to pursue contracts in military cybersecurity, Kennedy said, building on about 16 acquisitions the company has carried out in recent decades.
It also will give Raytheon a sizable foothold in the commercial aerospace market for the first time in recent memory. Before the combination, the lion’s share of Raytheon’s revenue came from the Pentagon and U.S. intelligence agencies. After the merger, about half of its revenue will come from supplying parts and components to the commercial aviation market.
Pratt & Whitney, which operates as a subsidiary of United Technologies, builds the engines that power Airbus’s A220, and A320neo and A380 commercial jets. And it is a dominant provider of military jet engines, building the supersonic jet engines that power F-15, F-16 and F-35 fighter jets.
The deal is expected to close in early 2020, subject to regulatory approvals. The company will retain its headquarters in the Boston area.
This story has been updated.